Consider these factors before getting an annuity.
Annuity income is predictable
If you are hale and hearty at age 65, Social Security predicts that you'll live at least another 20 years. That's a lot of rent to pay and groceries to buy. Taking the pension option means that no matter how long you live, you'll continue to receive a monthly check, albeit one that is probably not indexed for inflation.
Women benefit more than men
Company pensions are actuarially gender neutral, even though women employees and spouses of male employees live longer. If you are a married man, the company pension is probably a better deal for your wife than anything that you or she can buy elsewhere. If you are a female employee, think hard before you take the lump sum.
You can't lose it all
You don't have to be an investment genius or superdisciplined when you take the annuity. No matter how you go about it, managing money to provide income for 20 or 30 years or more requires expertise, commitment and taking some risk. If you are eligible to take a lump sum, expect private annuity salesmen and portfolio managers to come calling, eager to manage your money.
Their interest in your future is enhanced by the fact that they will earn somewhere between 1 percent and 4 percent -- and maybe even more -- of the total that you invest in their company's product. In the case of portfolio managers, the average fee is 1.5 percent annually of the amount they are managing.
Sharon Lechter, spokeswoman for the American Institute of Certified Public Accountants and co-author of the financial best-seller "Rich Dad Poor Dad," says 1.5 percent is a bargain for good investment advice. Still, on $475,000, 1 percent is $4,750 and 4 percent is $19,000 -- big money, especially if you don't have a lot of money to begin with.